What are the rulings on house mortgages, and is a full mortgage of a house problematic? Religious authorities have expressed their opinions on all of these questions.
Rulings and Conditions of House Mortgages in Islam According to Jurisprudents
The term "mortgage" in its literal sense means to hold something in trust, stability, and permanence. However, the definitions given by scholars differ from these terms. Some define a mortgage as the pledge of property as collateral to a creditor so that if the debtor fails to pay their debt on time, the creditor can claim the pledged property as payment. Other scholars argue that the term "mortgage" in Islamic law does not have a special meaning and is used in its literal sense.
In summary, a mortgage is a guarantee for a debt, where the debtor pledges part of their property to the creditor so that if they fail to repay the debt, the creditor can recover their debt from the pledged property. The terms "mortgagor" (the one who pledges), "mortgagee" (the one receiving the pledge), and "mortgaged property" are also used.
It should be noted that if the rulings and conditions of mortgages are adhered to, their execution and use are permissible.
Mortgages and Rent in Islam: A Type of "Usury"
A house mortgage or rental agreement in Islam can sometimes be considered a form of "usury" (riba) and thus not permissible under Islamic law unless the following conditions are met:
What is paid as mortgage for a house or shop is not considered a mortgage. However, if the rent is set below the prevailing market rate, there is no issue.
The landlord should not stipulate that if a sum of money is given to them as a loan or deposit, they will reduce the rent accordingly; this would be considered usury and is prohibited.
In a lease agreement, if the tenant pays a significant sum of money to the landlord, but the landlord grants the tenant possession of the property, with the tenant benefiting from the property and the landlord benefiting from the money, this is an unlawful arrangement unless the money is treated as a loan and repaid accordingly.
According to Islamic jurists, a lease where money is given as a loan (and not rent) and in return, the tenant enjoys the use of the property, is non-permissible unless the arrangement strictly follows the rules of loan repayment, thus preventing riba.
Key Rulings Regarding Mortgages (Rahn)
Definition of Mortgage: A mortgage occurs when the debtor pledges part of their property to the creditor to secure a debt. If the debtor fails to repay, the creditor may recover their due from the pledged property.
Requirements for Pledge: The debtor must offer the property as a pledge, and the creditor must accept it as collateral.
Conditions for Both Parties: Both the pledgor (rahn) and the pledgee (murtahin) must be sane, of sound mind, and not under duress. The pledgor must not be insolvent or mentally incompetent, unless allowed by creditors or guardians.
Authority to Act on Pledged Property: The mortgagee cannot act on the pledged property without the permission of the pledgor. Similarly, the pledgor cannot act in a way that conflicts with the pledge agreement.
Selling Pledged Property: Some scholars assert that if the debtor agrees, the creditor can sell the pledged property to recover their debt. However, this needs to be clearly stipulated in the contract.
Common Questions Regarding Mortgages and Leases:
Can a person in a mortgage agreement continue to reside, sell, or use the property?
The answer depends on the regulations set by the bank. If the bank permits such actions, there is no issue.
Is a full mortgage of a house problematic?
Some scholars state that a complete mortgage may not be allowed, while others argue that it is acceptable if it follows Islamic principles, like treating it as a loan rather than rental.
Responses from Islamic Jurisprudents Regarding Mortgage Agreements:
Ayatollah Khamenei: According to the laws of the bank, such actions may or may not be permissible.
Ayatollah Sistani: If it does not contradict the relevant laws and regulations, it is permissible.
Ayatollah Makarem Shirazi: Renting a house under certain terms, with the proper agreements in place, is acceptable.
General Considerations: Islamic law emphasizes that all financial transactions should be free from usury (riba), and any arrangement that turns into a loan disguised as rent is considered forbidden. Therefore, careful structuring of contracts is essential to ensure they comply with Islamic principles.
